Know The Impact Of Interest Rates On Purchasing Power
The interest rate you secure when buying a home not only greatly impacts your monthly housing cost, but also impacts your purchasing power.
Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford to buy will decrease if you plan to stay within a certain monthly housing budget.
The chart below shows the impact that rising interest rates would have if a buyer planned to purchase a $300,000 home while keeping his/her principal and interest payments between $1,520-$1,533 a month. With the interest rate going up buyer cannot afford that house anymore and has to go with the lower priced homes.
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